Amending Personal Return T1
When to amend your T1 Return?
You can amend your return when you discover any mistakes or omission on your original filed return which resulted in either an increase or decrease in the amount of tax payable.
CRA’s preferred method
Write a letter/message to the Tax Center where you filed your tax return with the changes in the tax return along with explanation and documents such as T3, T4A, T3, T5 etc. CRA also prefers that you include the T1-ADJ form along with the documents and an explanation.
Alternatively, file the adjustment through my CRA Account for the current year and the last 10 years.
Foreign Income Verification
T1135-Foreign Income Verification Statement
All Canadians are required to report their worldwide income as well as any assets outside Canada over $100,000 by using form T1135. But this is the most common mistakes new immigrants are doing by not declaring the foreign income or assets each year. It increases their hassle when they decide to bring back the proceeds of the income or assets from the foreign country. Because if T1135 is not filed each year then CRA considers all the money received as income on the year of receipt and are subject to tax in Canada. These foreign reporting forms provide information to CRA about foreign assets as well as income on foreign assets. This also ensures CRA that the Canadian residents are paying taxes on income earned on foreign assets.
How to avoid double taxation in Canada?
Foreign Tax Credit
Canadian resident for tax purposes or deemed Canadian residents who were present in Canada for 183 days or more in a taxation year is taxed on their worldwide income. So, they have to report their foreign income on their tax return in Canada and may be subject to double tax on foreign income. In almost all the countries except some places in the middle east, there are taxes on income generated by anyone. So, foreign income may have been subject to foreign taxes, accordingly, in order to avoid double taxation on the same income, a foreign tax credit is available to Canadian taxpayers who have paid foreign income taxes. Taxpayer gets the credit for the foreign taxes they paid in the foreign country and it reduces their overall tax payable in Canada. By granting a foreign tax credit, double taxation is avoided. Foreign business income tax credit if not needed in the current year then it can be carried back 3 years or carried forward for 10 years.
The Canadian government has signed tax treaties with several countries to avoid double taxation. Treaties are very specific to a particular country. So, use the provisions of the tax treaty whenever it is favourable to reduce overall taxes.
Uses of financial reports
Financial statements may be used by different stakeholders for a multitude of purposes. Owners and managers require financial statements to make important business decisions affecting its continued operations. Financial analysis is then performed on these statements, providing management with a more detailed understanding of the figures.
Fundamental concepts in accounting
Financial statements are prepared according to agreed upon guidelines. In order to understand these guidelines, it helps to understand the objectives of financial reporting.
To prepare the financial statements, it is important to adhere to certain fundamental accounting concepts. Going Concern, unless there is evidence to the contrary, it is assumed that a business will continue to trade normally for the foreseeable future.
Accruals and Matching
Revenue earned must be matched against expenditure when it was incurred
If there are two acceptable accounting procedures, choose the one that gives the less optimistic view of profitability and asset values.
Similar items should be accorded similar accounting treatments.
A business is an entity distinct from its owners.
Accounts only deal with items to which monetary values can be attributed. This helps existing investors, potential investors, creditors, and other users to assess the amounts, timing, and uncertainty of prospective net cash inflows to the enterprise. Separate valuation of each asset or liability must be valued separately.
Only items material in amount or in their nature will affect the true and fair view given by a set of accounts.
Transactions are recorded at the cost when they occurred.
Revenue and profits are recognized when realized. Every transaction has dual effects.
Retention of books and records
Financial books and records including all Income Tax and GST/HST returns must be retained for six years starting from the end of the taxation year.